Introduction to this report:

The company's revenue and performance are basically in line with expectations, and profitability has been restored month-on-month. We look forward to the expansion of the company's main home appliance business and new energy vehicles in 2023.

Key points of investment:

Investment advice: The company's 2023Q1 performance is basically in line with expectations. Although its performance is still declining year on year, it is in the process of gradual recovery, and the month-on-month improvement is obvious. We maintain our profit forecast. We expect the 2023-2025 EPS to be 0.47/0.63/0.81 yuan, +46%/+36%/+28% year on year. The reference industry gave the company 32xPE 2023, maintaining the 2023 target price of 14.9 yuan, a “increase in holdings” rating.

The performance was basically in line with expectations: the company achieved operating income of 206 million yuan in 2023Q1, +2.23% year on year, net profit of 0.2 billion yuan, -11.65% year on year, net profit of 18 million yuan after deducting non-return mother's net profit of 18 million yuan, compared to -15.25% year on year, and 2023Q1 performance recovered from 2022/4.

Focusing on overseas growth, new business expansion can be expected: 1) Overseas growth can be expected: the company's overseas revenue in 2022 was 451 million yuan, +6.3% year on year, accounting for 57.2% of revenue, +1.0pct year on year. We expect the company's overseas growth rate to be higher than domestic growth in 2023Q1. Considering that the company supports major overseas customers to increase strategic investment in Southeast Asia and other regions, it is expected that the share of the company's overseas revenue will increase further in the future. 2) The company's new business can be expected to expand: In the field of new energy vehicles, the company has reached cooperation with some leading customers. It is expected that in 2023, volume will be accelerated, opening up the company's second growth curve. Furthermore, the company's expansion in new business fields such as cleaning electrical filters and full heat exchangers is also worth paying attention to.

Profitability improved month-on-month, and cash flow was clearly optimized: The impact of the 2022 pandemic and the like posed a major challenge to the company's factory management and order management. We expect the pace of order production and response in 2023Q1 to gradually stabilize. Although the net profit of the mother returned to the mother declined year on year, it is in the process of gradual recovery, and the improvement is obvious from month to month. The net cash flow from the company's operating activities in 2023Q1 was $32 million, +92.3% year on year, a significant improvement.

Risk warning: The pace of gross margin recovery and new business expansion is uncertain.